INSIGHT

Why the Retention Trophy is bigger than the World Cup

We’re sure you haven’t missed it: England’s women have progressed to the semi-final of the World Cup, where they will face the defending champions, the United States. It’s great news for Lioness fans, but there are also business lessons to take from their extraordinary success.

As an international manager, Phil Neville can’t spend millions of pounds on star-studded players like Manchester City’s Pep Guardiola. He has to work with the talent at his disposal, nurturing and coaching the players to fulfil their potential.

It’s an approach that is clearly working wonders, and the same principle applies to businesses—protecting and nurturing existing customer relationships is paramount.

But what does protecting your customers actually mean? And in the digital-first era of switching between services with the touch of a button – just look at the impact of Monzo on banking – is it realistic and worthwhile? Isn’t dedicating all your energy to acquisition the best (and only) way forward?

Going for the Retention Trophy

Two competitions that businesses should pursue are the Retention Trophy and Acquisition Cup. But which is really worth entering?

Recent research revealed that increasing customer retention rates by just 5% boosts profits by 25% to 95%. This is backed up by a separate study which found that leaders in customer experience delivered 17% CAGR compared to just 3% with poor user journeys.

Then there’s the question of cost — acquiring a new customer can be five times more expensive than retaining an existing relationship. And the success rates aren’t exactly spectacular — the probability of selling to a new customer stands at around 5-20%, whereas the figure is about 60-70% for an existing client.

The message is clear: focus purely on acquisition without caring for and enhancing your existing customer relationships, and there could be a damaging impact on the bottom line.

The tactics for success

Tactically, what are the secrets of winning the Retention Trophy?

The first step is to consider the psychology of buyers. 80% expect real-time communication to be built into the customer journey, while 74% feel that personalisation plays a key role in influencing their loyalty to a brand. There is clearly appetite for a tailored and responsive experience, but which businesses are addressing this?

A company that’s done this superbly is Starbucks — its mobile order and pay app gives customers loyalty points for every purchase they make, and it’s reached the stage where customers on the membership programme account for around 40% of sales in the US.  This is a consumer-focused scheme, but the principles still apply to B2B customers. It’s not about annual price rises anymore, but understanding customer needs, seeing what their usage is, and adapting accordingly. This is what builds trust and elevates a customer relationship towards a level of mutual respect.

Another brand disrupting the traditional loyalty model is Reebok, which has unveiled an initiative called Unlocked. Customers who sign up to the scheme will receive points for interactions with the brand and not just purchases. For example, a customer could earn points by reviewing a product, attending Adidas events or liking a social post — essentially turning them into brand ambassadors. The learning here is that businesses need to think laterally about what “loyalty” actually means — it’s something that goes beyond a transactional relationship and towards a holistic view of what it means to engage with a business in a meaningful way.

Clear rewards

We’re not suggesting cutting out acquisition efforts completely but focusing on customer retention and putting your clients at the centre of your business strategy has clear rewards. And — as we’ve seen — it’s more straightforward than you might think.

The best thing about the Retention Trophy is that — unlike the World Cup — there isn’t a single winner. The prize is available to all who commit to nurturing their existing customer base. It’s something that should be at the heart of any successful commercial strategy.  

Get all the insights straight to your inbox

Register here to join us

  1. Please enter an email address Email address is required.
  2. By entering your telephone number and email address, you’re providing your consent for Virgin Media Business to contact you to discuss your requirements now and offers from time to time.  You can opt out at any time if you change your mind. To view our privacy policy please click here.

 
 

Share this article:

Download our top guides and reports

Latest insights

 
 

Already a customer?

Grab yourself a free upgrade to Voom 500.

 
 

Like this article? You may also be interested in these too!